Outsourcing Is Good – for Investors

Outsourcing. To politicians, railing against it brings votes. To companies, it cuts costs. But to Cramer, it’s a chance to make Homegamers some mad money.

And that’s no easy task in this market. Sure, the Dow was up 172 points today, thanks in part to a strong earnings announcement from IBM . But, as far as Cramer’s concerned, the rally was just a break in the clouds. The storm will continue.

That’s why he recommended buying the defensive stocks traders abandoned today. It’s a chance to get these picks on the cheap before they start to climb again. And Cramer wasn’t talking just about the typical supermarket and drugstore companies. His focus for Monday’s show was on some lesser-known plays called contract research organizations.

CROs help develop drugs and run clinical trials for big pharma and biotech companies – both of which provide defense in a tough market. Outsourcing the work can save the Pfizers of the world as much as 60% in R&D costs, Cramer said, making it an extremely viable business. So much so that the 25% market share CROs command today should grow to 40% over the next couple of years.

The best company in the sector, according to Cramer, is Covance. CVD has an "immaculate balance sheet" and the stock’s only a point off its high, despite the dismal Dow. Even though shares have risen 52% over the past year, “CVD still has a long way to go,” Cramer said. Trading at $95 and change, he said Covance could reach $115.

Cramer said he’s also a fan of Parexel International and Charles River Labs , but his favorite CRO is Covance.

Yes, the market looked good Monday. But if the rally doesn’t last, as Cramer expects it won’t, CROs are a great way to play defense.